45% of Consumers Call Their Finances Insecure Ahead of Holidays

Rising prices and rampant uncertainty are pushing both retailers and their customers to be careful this holiday season, and the numbers behind that caution are stark.

Some 45% of consumers surveyed by cash-rewards app Ibotta describe their household finances as insecure, and more than 70% say saving money will be a priority this year. Among lower-income households, more than 30% are dealing with "unmanageable levels of debt," according to research from The Financial Health Network and the University of Southern California, which also found fewer lower-income households managed to pay all their bills on time in the past 12 months compared to a year ago.

Prices have climbed steadily since January 2018, according to Numerator. Low-income consumers now face prices up by more than a third, and high-income consumers are paying over 30% more.

Consumers expect gifts and seasonal items to cost more this year, too, according to research from Accenture. Many households are already tapping savings or turning to high-interest credit cards to cover everyday bills, so holiday expenses loom larger, according to Dat Ngo, an accountant and personal finance adviser at Vetted Prop Firms. Some families will need to "set a firm holiday budget," he said by email.

"The real problem is not one expensive month. It is entering January with credit card balances that take months to pay off, while regular expenses continue," Ngo said. "A smaller holiday is much easier to recover from than several months of expensive debt."

While more than 30% of U.S. consumers expect their holiday budgets to be bigger than a year ago, more than half of those planning to spend the same or more say it is because everything is more expensive, Accenture found.

"Consumers are just having to be a little bit more thoughtful and intentional about where they're spending, why they're spending, and how they're spending," Kelly Askew, global retail industry lead at Accenture, said during a virtual event held by Retail Dive earlier this month.

The plan

To stretch their budgets, shoppers have started earlier. More than a third bought holiday items during sales events over the summer, and 30% anticipate starting earlier than they did last year, according to Ibotta's research. More than twice as many people did holiday shopping over the summer months this year compared to last year, according to Accenture.

Promotions — whether Prime Day, Labor Day, Black Friday or any other sales event — largely determine what shoppers buy, more so than gift lists, family recommendations or a brand's reputation, Ibotta found.

AI will help consumers stay within their budgets. Consumers surveyed by Accenture expect generative AI to influence 45% of their holiday spending, with finding deals the top use case, followed by comparing options and deciding where to buy.

The selection

Price is not the only factor. Shoppers want value and want to find what they are looking for — which could be tricky this year, as retailers keep inventories lean, according to Phillip Blee, consumer equity research analyst at William Blair. That will likely mean fewer last-minute shoppers, according to Blee and Askew.

"Everyone's a little bit concerned that inventory is light, and that out-of-stocks could happen," Blee said at the Retail Dive event. "So I think consumers want what they want, and value is important. But value doesn't mean just deep discount or low price, right? The consumer wants the quality product, and they want it at the right price."

That includes newness, Blee said. During the pandemic, as their supply chains roiled, retailers stocked up on goods whenever they could, then ended up with too much inventory as customers tired of the assortment. That experience has left retailers "on edge" about holiday inventory planning.

"Especially with transportation costs being so high, input costs being so high, tariffs being all over the place, I think that there's a lot of risk for them to take on with inventory," Blee said. "So I think that they're feeling very much ... that they need to keep inventory light. I think that they would prefer to potentially miss out on a little bit of sales in order to avoid an inventory glut at the end of the season that would require high clearance rates on an already very expensive product."

The place

Shopping online is easier than ever, with opportunities on mobile, social media and, increasingly, via AI. But consumers still gravitate to brick-and-mortar stores during the holidays. Over 40% of shoppers go to stores to check out merchandise before they buy, and shoppers prefer stores over generative AI tools for advice and recommendations, Accenture found.

"A third of people say they visit it for inspiration and ideas and just kind of the vibe and energy that comes in a retail environment around the holidays," Askew said.

For marketers, the season ahead favors early, promotion-led campaigns tied to leaner assortments — and a store experience that AI tools cannot yet replicate.